Global demand for liquefied natural gas (LNG) is expected to cross 700 million metric tons/year (mmty) by 2040, a 90% increase from 2021 consumption, according to Shell plc.
In Shell’s latest LNG Outlook, the energy major said Asia was expected to consume most of the growth as “domestic gas production declines, regional economies grow and LNG replaces higher-emissions energy sources, helping to tackle concerns over air quality and to help progress toward carbon emissions targets.”
Shell researchers also predicted an LNG “supply-demand gap” will emerge in the mid-2020s. The expected LNG gap “focuses attention on the need for more investment to increase supply and meet rising LNG demand, especially in Asia.”
Shell researchers said the global trade last year increased 6% year/year to 380 mmt as many countries began to rebound from the economic impact of the Covid-19 pandemic. The gains came from rising demand as economies recovered from Covid-19 lockdowns. However, because of supply constraints and undersupplied markets, prices were volatile, hitting record levels in October.
“Around the world, more countries announced net-zero emissions targets, adding pressure to decarbonize energy systems,” Shell researchers said. “As a reliable, available and lower-emissions energy source, gas has an important role in supporting this transition, both as a partner to renewables for grid stability and an immediate option to lower emissions in hard-to-electrify sectors.
“Multiple outlooks differ on the share of gas in the long-term energy mix, but there is agreement that it will continue to be needed. Decarbonizing gas and LNG value chains, and developing cleaner pathways, will strengthen their role in the energy transition.”
How Long Will LNG Remain Valuable?
“Last year showed just how crucial gas and LNG are in providing communities around the world with energy they need as they strived to get back on track following the difficulties caused by the Covid-19 pandemic,” said Shell’s Wael Sawan, director of Integrated Gas, Renewables and Energy Solutions.
“As countries develop lower-carbon energy systems and pursue net-zero emissions goals, focusing on cleaner forms of gas and decarbonization measures will help LNG to remain a reliable and flexible energy source for decades to come.”
LNG exports grew in 2021 despite several unexpected outages that dented supply available for delivery. The United States led export growth with a year/year increase of 24 mmt. The United States also is expected to become the world’s largest LNG exporter in 2022.
During the fourth quarter conference call, CEO Ben van Beurden said he thought “recovery of oil and gas demand…is very much in evidence.” Demand for gas in the Asia-Pacific region “is booming,” with a “12% rise in gas demand in China.” There’s also a “tremendous pull” for LNG in the region.
Last year China and South Korea led the demand growth. China increased its LNG imports by 12 mmt to 79 mmt, surpassing Japan to become the world’s largest LNG importer, researchers said.
“During 2021 Chinese LNG buyers signed long-term contracts for more than 20 mmt/year,” according to the report. Those contracts “signaled an ongoing role for LNG in coal-to-gas switching in powering key sectors and helping to reach its ambition to be carbon neutral by 2060.”
Going forward, LNG is likely to play a key role in using renewable energy, as well as a backup for intermittent supply.
“Brazil, for example, tripled imports of LNG during 2021 – to over 7 mmt – as persistent dry weather led to weaker hydropower generation,” researchers noted. In addition, efforts to reduce emissions from natural gas and develop less carbon-intensive pathways are forecast to bolster the role of LNG.
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